OMS subsidy rises 104% this fiscal year

As the economy has been battered by Covid-19 pandemic and food grain supply dwindled amid the Ukraine war, the government has scaled up its budget for Open Market Sales, across the country.

The government spent more than 104 percent in its OMS programme compared to the 2020-2021 fiscal year due to feeding low-income people in the country during the last couple of years into the pandemic, a food ministry report says.

“The government had no choice but to supply essential products with lower prices to the working class amid the Covid-19 pandemic,” said an official, requesting anonymity.

The government will maintain the lower prices in the next fiscal year, too, as the global market turns volatile for many reasons, including the ongoing war, he said.

Such intervention, say experts, is crucial to protect marginal people against inflation amid rising supply shock caused by war in Ukraine.

The official said the number of affected people is rising and that they need a break amid the evolving situations. He said there is no sign of easing prices of the essentials, especially rice, which is selling at Tk 55 to Tk 60 per kilogram.

The government began OMS, selling rice at Tk 30 a kilogram and wheat at Tk 18, respectively.

The country’s inflation rate jumped to 6.29 percent in April, up by 0.07 percentage point from the previous month’s 6.22 percent, according to the Bangladesh Bureau of Statistics (BBS).

A person can buy a maximum of five kilograms of rice and five kilograms of wheat at a time.

According to the food department data, 2.45 lakh tonnes of rice and 2.12 lakh tonnes of wheat have been distributed in this FY until 13 January.  The respective figures had stood at only 722 tonnes of rice and 1.60 lakh tonnes of wheat during the corresponding period of the previous FY. 

Chairman of Research and Policy Integration for Development (RAPID) and Economist, Dr Mohammad Abdur Razzaque, said, it is likely that the government will continue its subsidies for the poor in the next financial year as situations demand for such actions.

“Do not impose any austerity measures on the poor section of people,” he said.

Razzaque also said orthodox institutions like the IMF has also requested the government of every country for continuing food subsidies to the poor.

He said: “Inflation have been rising globally with depreciation in local currency. Where will the poor go?”

According to the food ministry, the total subsidy for OMS’ essentials products now stands at Tk 1943.58 crore, up by Tk 994.61 crore. This means the subsidy allocation has increased 104% from the budget allocation of Tk 948.58 crore for the 2020-2021 fiscal year.

The total subsidy for OMS’ essentials products for the next fiscal year will aggregate Tk 1,720.26 crore, down by Tk  223.32 crore.

Meanwhile, the government plans to cut food subsidies by around Tk 92.02 crore or 1.45 percent to Tk 6,252.87 crore in the next fiscal year’s budget to ease some pressure on the subsidy outlay.

Food subsidies, however, have increased by 68.03 percent during the last six consecutive fiscal years since the Food Friendly Programme started in 2016-17 fiscal with an allocation of Tk 3,721.18 crore.

“Cut in food subsidy could be seen as part of an austerity measure taken by the government amid the food grain supply crunch because of the Ukraine war and economic recovery from COVID-19 pandemic,” an official of the food ministry said.

However, total food subsidy will see an enhancement to Tk 6344.88 crore in the revised budget for this fiscal year, food ministry data reveals.

Meanwhile, the subsidy under the FFP in the next fiscal year will be Tk 2,544.01 crore which has been cut by Tk 272.71 crore or 9.68 per cent from the revised budget of Tk 2,816.72 crore, respectively.